Overview
- The DAX moved back toward its all‑time high after Thursday’s US consumer price report showed July inflation rising 0.1% month‑on‑month and 3.4% year‑on‑year, which reduced market expectations of a near‑term Fed rate increase.
- An EY analysis released this week found the 40 DAX companies posted a combined Q2 operating profit of €52.6 billion, the highest on record for the quarter, even as reported headcount fell by about 41,000 year‑on‑year to roughly 3.49 million employees.
- Profit growth is concentrated: defence contractors, firms benefiting from the boom in artificial‑intelligence and datacenter spending, and some chemical companies drove the gains, while the auto sector lagged with about a 1.2% revenue drop and a c.12% fall in operating profit.
- Oil remains a key downside risk to the outlook with Brent trading around $87–88 and WTI near $81–82, and traders point to stalled talks over control of the Strait of Hormuz and tensions with Iran as sources of price volatility that could push inflation higher.
- The market rally masks a split in the real economy because large multinationals earn much of their profits abroad, domestic demand in Germany stays weak, and rising wholesale energy prices could pressure consumers and spur further policy scrutiny.